The budget battle arising in Washington will paint a dramatic contrast between the two major parties. House Budget Committee Chairman Paul Ryan’s budget for fiscal year 2012 is not even due out until April. But the House GOP has approved cuts that total $100 billion for fiscal year 2011 as compared to President Obama’s 2011 budget request, which was their campaign promise in 2010. In federal budget years, fiscal year 2011 started on October 1, 2010, before the House GOP even took office in January.
Confusion arises because last year’s Democrat-controlled Congress did not even pass a budget. The government has been operating so far this year on a continuing resolution (CR) that was adopted last December to fund the government through March 4. The $61 billion in cuts the media has reported the GOP House as approving and sending to the Senate is by comparison to a baseline for the rest of this fiscal year under that continuing resolution (CR).
Because the Democratic-controlled Senate was not prepared to act in time to extend funding for the government past March 4, to avoid a government shutdown the House GOP approved a 2 week extension of the CR that implemented $4 billion of that $61 billion in cuts. Senate Democrats agreed to that, which only keeps the government funded through March 18.
But the Democrats have drawn the line at agreeing to only $6.5 billion more in cuts for the rest of this fiscal year (until September 30), for a total of $10.5 billion in cuts for fiscal year 2011. The Senate’s second ranking Democrat, Dick Durbin from Illinois, proclaimed on Fox News Sunday a week ago that this $10 billion in cuts for 2011 was the absolute limit. If those wild-eyed Republicans were allowed to cut any more, Durbin claimed, the fragile economic recovery would be stalled, and America would lose the critical federal spending President Obama and the Democrats believe is essential to maintaining America’s competitiveness with China.
Rep. Chris Van Hollen (D-MD), ranking Democrat on the House Budget Committee, predicted on CBS’s Face the Nation on February 20 that implementing the GOP’s full $100 billion spending cut for fiscal year 2011 would cause a loss of 800,000 jobs. Senator Chuck Schumer (D-NY) claimed the GOP spending cuts would risk a double dip recession.
For a little context, President Obama’s own budget projects the federal deficit for fiscal year 2011 at $1.645 trillion, or $1,645 billion, with total federal spending at $3.819 trillion, or $3,819 billion. The Democrats’ position is that it would be radical and extreme, imperiling the lives of women and children, with nearly a million jobs lost, while further risking a double dip recession, if more than $10 billion out of that $3,819 billion in spending were cut, and the deficit of $1,645 billion were reduced to less than $1,635 billion.
And this is before we even get to the main event, which is the full budget for the new 2012 fiscal year. President Obama’s budget for that year opens the bidding with a net spending cut of $6 billion, compared to total federal spending he proposes for next year of $3,729 billion, leaving a federal deficit he projects for that year of $1,101 billion.
Which raises a question for Messers Durbin, Van Hollen, Schumer and Obama: how stupid do you think we are? Can you possibly expect us to believe that cutting more than one-fourth of one percent out of a record multitrillion dollar budget is a radical, extreme measure that would yank food out of the mouths of children, deny women essential health care, and crash the economy?
We are supposed to believe that slashing the deficit from $1,645 billion all the way down to $1,545 billion will somehow deprive America of the ability to compete. But somehow that very deficit of $1,645 billion does not deprive America of competitiveness with China, and the rest of the world.
Here is a little more context. President Obama’s own budget shows that the national debt will more than double over his one term in office, from $5.8 trillion in 2008 to $11.9 trillion in 2012. That means that in just one term of office, President Obama will have accumulated more national debt than all prior presidents combined, from George Washington to George W. Bush.
Moreover, in February, the federal deficit totaled $222.5 billion for just that one month, an all time record. For the last fiscal year for which Republican congressional majorities adopted the budget, 2007, the federal deficit for the entire year was $161 billion. Early last year, when President Obama spoke at the Republican Congressional Retreat, Rep. Jeb Hensarling (R-TX) rose to allege that what were the annual deficits under the Republicans had become the monthly deficits under the Democrats. President Obama denounced the statement as untrue, saying that sort of wild rhetoric is what prevents the parties from working together. But it is rank dishonesty taking advantage of the difficulties the average voter faces in parsing through the blizzard of budget numbers and documents, without any help from the Democratic Party-controlled “mainstream” media, that prevents the parties from working together.
What all this reveals is that the Democrats are at war even more with the Tea Party than with the Republican Party. The Democrats consider the Tea Party and its grassroots activists to be on another planet, and bitterly oppose everything they believe in. That is what was reflected in Rep. Barney Frank’s recent comment comparing the Tea Party to a meeting between the Mad Hatter and the White Rabbit.
Of course, in the full context, even the budget cuts the Republicans are seeking are inadequate. Even $100 billion in cuts represents a reduction in this year’s budget of only 2.6%, and reduces the federal deficit from an absurd $1.645 trillion to a still ludicrous $1.545 trillion. But they deserve some credit for taking on cuts for fiscal year 2011, which is already almost half over, and for which the die was effectively cast last year when they were an ignored minority. The full measure of Republican efforts to cut spending will be Paul Ryan’s 2012 budget, for the first fiscal year for which the new House majority is responsible.
But we already know how the Democrats will respond to Ryan’s 2012 budget. Their position will be that the Republicans are wildly irresponsible for not spending enough, just as it is now regarding the modest 2011 spending cuts. The voters will have to decide just who it is that is wildly irresponsible.
Here is another issue for the voters to decide. The Democrats’ budget policy is based on their belief that what creates economic growth is increased government spending. Indeed, that viewpoint was centrally featured in President Obama’s State of the Union address. Former House Speaker Nancy Pelosi expressed this view most credulously last year in actually saying that the biggest bang for the buck in promoting the economy comes from increased government spending on food stamps and unemployment insurance. But outdoing even her was Senate Majority Leader Harry Reid, who recently rapturously explained his vision for a booming economy resulting from spending millions of taxpayer dollars on the cowboy poetry festival in Nevada (which nevertheless has somehow long led the nation in unemployment).
But economic growth and prosperity comes not from increased government spending, but from increased production, which comes from increased incentives to produce. That means reduced tax rates, allowing producers to keep a higher percentage of what they produce, and deregulation to reduce the cost burdens and barriers on production. Increased government spending is mostly a drag on that production, requiring either increased tax rates, or increased government borrowing that drains the private sector of funds.
The real problem for Republicans in the budget fight is that they are too afraid of a government shutdown, due to a misreading of what happened in 1995, even among some conservatives. Former House Speaker Newt Gingrich and the Republicans won the substance of that battle, as Clinton agreed to most of their spending cuts and tax cuts in the end. The result was a booming economy in the late 1990s, and the transformation of $200 billion budget deficits at the time into historic, unprecedented budget surpluses, peaking at a record $236 billion in 2000.
Nor did Gingrich and the Republicans lose the politics of that fight. In 1996, the House Republican majority was reelected, along with the Senate Republican majority, which was the first time that had happened for almost 70 years. What has been overlooked is that Clinton sailed to reelection not only because Dole was hopeless, but because the public was rewarding him for agreeing to the Republican spending and tax cuts.
House Republicans need to recognize their advantage and pass the continuing resolution for the rest of this year with all of their proposed budget cuts, if not more. That would trap the Democratic Senate, because if they pass a CR spending more than the House, that will clearly frame the issue for the public as to who the bigger spenders are. If the Democraict Senate fails to even pass a CR, that will make clear to the public who is responsible for shutting down the government.
But there is another advantage for the Republicans. Recent budget votes make clear that with moderate Democrats, the Republicans actually enjoy working control of the Senate, at least on this issue. This means that if the Republicans stick to their guns, and keep passing CRs covering the rest of the year with their actually too reasonable budget cuts, the Senate will cave to them.
At that point, President Obama will be trapped as well. If he vetoes a bipartisan CR passed by both the Republican-controlled House and a Democratic-controlled Senate, then he will bear the blame for shutting down the government, all the more so because the Republican cuts for 2011 are so modest.
All of which may mean a short term victory for the Republicans on their budget cuts, at the price of a bigger political problem for 2012. If President Obama agrees to the cuts passed by both houses, he will soar in public esteem for doing that, just as he got a bump in public approval for going along with extending the Bush tax cuts for everyone. President Obama will seem to have shown that he can lead the country to adopt bipartisan solutions after all, cutting the government as the public demands. President Clinton agreeing to the budget cuts the Republicans wanted in 1995 was the real reason he sailed to reelection in 1996, not because he pinned the blame on the Republicans for the shutdown.
Hence the real problem in the Republicans asking for too little in budget cuts. The Republicans actually hold the high cards in this fight because the public overwhelmingly agrees with them on the budget. So they need to demand a higher price in spending cuts that goes farther in solving the problem, lest they give President Obama a big political stick for 2012 while getting too little in return.